AllianceBernstein Holding L.P. — Q2 2023 Form 10-Q
Business context and period: The filing covers the quarter and six months ended June 30, 2023. AB Holding is a publicly traded partnership whose primary income and cash flow come from its investment in AllianceBernstein L.P. (AB); it accounts for that investment using the equity method. The figures below are for AB Holding unless noted.
Key financial results
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Equity income from AB | $69.1 million | $75.4 million | $145.5 million | $169.7 million |
| Net income | $60.6 million | $68.1 million | $128.0 million | $154.1 million |
| Diluted net income per unit | $0.53 | $0.69 | $1.13 | $1.56 |
| Distribution per unit | $0.61 | $0.71 | $1.27 | $1.61 |
- Net income fell 11.1% in Q2 and 16.9% for the first half, primarily because AB’s net income attributable to unitholders declined; higher AB Holding ownership partly offset the decrease. AB Holding’s weighted-average ownership interest was 39.3%, up from 36.1% in 2022.
- Adjusted diluted net income per unit, a non-GAAP measure used in determining distributions, was $0.61 for Q2 and $1.26 for the first half, versus $0.71 and $1.61, respectively, in 2022. The filing cautions that non-GAAP measures are not substitutes for GAAP results or cash-flow measures.
- Q2 income taxes were $8.6 million and the effective tax rate was 12.4%, compared with 9.6% a year earlier. For the first half, taxes were $17.5 million and the effective rate was 12.0%, versus 9.2%.
- First-half operating cash flow was $152.3 million, down from $218.0 million, mainly due to $63.8 million lower cash distributions received from AB. Financing cash outflow was $152.3 million, principally reflecting distributions to unitholders. Cash and cash equivalents were zero at period end.
- At June 30, investment in AB was $2.044 billion; total assets were $2.044 billion, liabilities $352,000, and partners’ capital $2.044 billion. The presented balance sheet reports no debt. Margins are not meaningfully presented for AB Holding, and this filing text does not provide a clear standalone AB revenue or margin figure.
Outlook, risks and other items
- On July 27, 2023, the General Partner declared a $0.61-per-unit distribution for the quarter ended June 30, payable August 17 to holders of record August 7. Management expects available cash flow generally to track adjusted diluted net income per unit, subject to possible adjustments.
- Management believes cash flows from AB will provide resources to meet AB Holding’s obligations. That capacity depends on AB’s operating cash flow, capital-market performance, client assets and other factors beyond management’s control. No specific earnings or revenue guidance is provided.
- Risks include market and investment performance, client asset levels, competition, regulation and taxes, and unpredictable litigation outcomes. AB Holding’s partnership status is also important: losing publicly traded partnership tax status could materially reduce net income and distributions.
- An ERISA class action alleges fiduciary-duty violations involving proprietary investment options in AB’s employee plan; damages sought are unspecified. The outcome is not determinable, and management does not currently expect a material adverse effect. Other matters may result in losses, but estimates are unavailable.
- AB Holding reported no material change in risk factors or market risk, no material change in internal control, and no subsequent event requiring disclosure. It did not adopt a unit repurchase plan in Q2; 321 units were retained for employee tax withholding.
Important facts for investors to verify
- Review AB’s separate 10-Q, incorporated as Exhibit 99.1, for operating revenue, margins, assets under management, debt, and detailed business trends; those measures are not fully included in this AB Holding filing text.
- Check whether AB’s distributions and operating cash flow support future AB Holding distributions, which are not guaranteed at the declared amount.
- Monitor the ERISA litigation and other legal or regulatory matters for developments or estimable exposure.
- Assess the impact of the higher effective tax rate and the continued preservation of AB Holding’s publicly traded partnership tax status.